Recent rainfall in Western Europe has boosted output forecasts for the EU wheat crop, though analysts warn that more rain will be required to avoid potential crop damage from drought. Forecasters remain positive for EU wheat as increased sowings and more favourable weather conditions this year (including a mild winter) suggest that output could return to normal after last year’s drought-afflicted harvest. The official forecast for EU common wheat production in the 2019-20 season was raised to 141.3 Mt this week, putting it a full 10% above last year’s output.
Following an extended dry period in April, rainfall in southern European Union nations like Spain and Romania would likely drive improved yields in the current season. Continued rain is nonetheless necessary to keep a repeat of last year’s drought downturn. France, nonetheless, has recently reduced its rating for soft wheat crops that are in good-excellent condition to 79% from a previous rating of 81%. Persistent dryness also remains an issue in Germany, the EU’s second biggest wheat producer, with concerns especially heightened for the northern and eastern parts of the country. German farm association DRV is maintaining an optimistic output prediction of 24.44 Mt for this season’s wheat, up 20.6% from a year ago, though analysts caution that sub-soil water measurements are still under the levels they need to be to keep crops sufficiently supplied with water.
Reflecting the generally lukewarm attitude that the European fertilizer buyers and agri-producers currently have toward the market, recent attempts by MOP producers to raise their sales prices for the next quarter have been roundly rebuffed. Producers have reportedly attempted to push for prices up to EUR 300/mt CIF for granular MOP sales in Northwest Europe, but have been met with rejection at nearly every turn, according to trader sources and Fertilizer Week. Market players say that MOP producers had been looking for price hikes of around EUR 5/mt over the last quarter with a general target of EUR 300/mt CIF. Sluggish demand and plentiful MOP supply has stymied those attempts, however, with buyers sticking to last-done or nothing. Current price levels for gMOP in NW Europe are hovering at EUR 290-295/mt CIF while standard MOP is seen trading closer to EUR 270-275 CIF. MOP inventories at terminals such as Rouen have remained plentiful all year, leaving buyers with little motivation to stock up pre-emptively or at higher cost.
As the leading driver of iron ore demand, steel production remains a crucial indicator of global raw material usage. Global steel output rose by 4.9% in March, according to the World Steel Association, up from the same month in 2018, hitting 155 Mt in the combined 64 countries tracked by the WSA. The first quarter of the year saw global steel production rise by 4.5% YoY to 444.1 Mt while Asian steel output rose 7.0% in the same three months to 312.9 Mt. European Union steel output was 42.3 Mt in Q1-2019, 2% lower from Q1-2018, while North American output rose by 4% to 30.7 Mt in the quarter. Of the EU producers, Italian steel output in March fell 0.3% year-on-year to 2.3 Mt while French output rose by 2.3% to 1.4 Mt and Spanish output increased 5.9% to 1.4 Mt. Germany, still the EU’s top producer, generated an estimated 3.7 Mt in crude steel in March, 1.1% down from a year ago. German steel output for the first quarter amounted to 10.5 Mt or 3.6% less year-on-year. Italy, the EU’s second biggest steelmaker, produced 6.3 Mt in crude steel in Q1-2019 or 2.1% less than Q1-2018. French steel output was 3.9 Mt in the quarter, down 2.7% year-on-year. Turkish crude steel output in March fell 11.7% YoY to 3.0 Mt. Ukrainian steel production in March rose by a considerable 15% YoY to 2.0 Mt. Russian steelmaker Evraz reported that its Q1 consolidated crude steel production rose 12.4% (compared to Q4-2018) to 3.5 Mt due to higher pig iron production at one of the company’s blast furnaces, which completed repairs at the end of 2018.
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